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New home sales drop as HomeBuilder end looms

New home sales reduced considerably in January as the dash to access the HomeBuilder grant tapered off after a bumper December, according to an economist.

The Housing Industry Association (HIA) New Home Sales report has revealed that new home sales in January were only 30 per cent of the number of sales achieved in December 2020.

HIA chief economist Tim Reardon said that this was driven by the HomeBuilder grant drawing forward sales in December last year.

In addition, new home sales in January 2021 were 12.1 per cent lower than at the same time the previous year, Mr Reardon said.

“New home sales reached remarkable heights in the December 2020 quarter, almost 100 per cent higher than at the same time the previous year,” he said.

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“The impact of HomeBuilder is already being observed in record-high housing finance results and approvals data and this will lead to strong jobs growth in the industry in 2021.

“The surge in sales at the end of 2020 can be attributed to HomeBuilder as households finalised contracts to build a new home before the end of the 31 December 2020 deadline to access the $25,000 grant.”

Indeed, the Australian Bureau of Statistics’ (ABS) building approvals data for December 2020 had shown that approval numbers for private houses rose by 15.8 per cent in December, the largest number of approvals since the series began in 1983.

The ABS lending indicators data for December 2020 had revealed that the total value of new loan commitments rose by 8.6 per cent during this period (seasonally adjusted) to $26 billion, while the value of new owner-occupier home loan commitments rose by 8.7 per cent to $19.9 billion.

Despite the decline in new home sales in January, Mr Reardon said the January results have nevertheless been encouraging, given the quiet nature of the market in January, which is usually a slow month for sales.

“The relative strength of sales in January is encouraging and indicates that there will remain ongoing demand for new homes beyond the HomeBuilder scheme,” he said.

“Low interest rates, rising house prices and a demographic shift in demand towards detached housing and regional areas should ensure ongoing demand for new homes albeit at a level significantly below that observed in the last quarter of 2020.”

He added that after drawing forward sales into December, HomeBuilder could push sales back until the end of March when the reduced $15,000 HomeBuilder grant is no longer available.

The federal government recently announced that the HomeBuilder scheme would be extended until 31 March 2021.

For all new build contracts signed between 1 January 2021 and 31 March 2021:

  • Eligible owner-occupier purchasers will receive a $15,000 grant.
  • The property price caps for new builds in NSW and Victoria have been increased to $950,000 and $850,000 respectively.

“For this reason, sales are expected to remain flat in February before another surge in March. The March surge will not be of the same quantum as December due to the lower grant offering,” Mr Reardon said.

According to recent Treasury figures, as at 31 December 2020, a total of over 75,000 households had applied for the HomeBuilder grant, with 80 per cent applying to construct a new home, while 15,380 applied for rebuilds.

The grant also spurred increased demand for residential land, with the HIA-CoreLogic Residential Land Report for the September 2020 quarter revealing that demand had jumped by 27.7 per cent.

[Related: Mortgage stress mounts as support winds back]

New home sales drop as HomeBuilder end looms
New home sales drop as HomeBuilder end looms
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